AMD shares fall as data-center sales boom remains months away

By Arshiya Bajwa

Feb 3 (Reuters) – Advanced Micro Devices on Tuesday forecast a slight drop in first-quarter revenue despite an unexpected boost from sales of its AI chips in China, raising concerns about whether it can effectively challenge Nvidia in the growing AI market.

Aside from surprising AI chip sales to China, the company’s data-center segment missed estimates at a time when longtime rival Nvidia has accustomed investors to blowing forecasts. In a conference call with investors, AMD CEO Lisa Xu reiterated that the company expects sales of its new flagship AI server to OpenAI and others to grow rapidly in the second half of this year, with the global memory-chip crunch not slowing down its plans.

“I don’t believe we’re going to be supply-constrained in terms of the ramp we’ve put in,” Xu said.

Still, those sales remain outside the company’s forecast for the current first quarter, meaning its other chips, such as central processing units (CPUs), will have to bear most of its sales growth in the coming months. Shares fell 7% in extended trading.

“Expectations of big blowout quarters for AI-related hardware companies miss what the market is looking for,” said Bob O’Donnell, president of Technolysis Research.

Santa Clara, California-based AMD is seen as the closest contender to challenge the AI ​​chip dominance of the world’s most valuable firm, Nvidia, as Big Tech and governments around the world double down on investment in AI hardware.

During the conference call, Su also mentioned that AMD is working on new AI servers with customers beyond OpenAI.

But analysts worry that AMD’s success is tied to a handful of customers that rivals such as Nvidia may try to poach. Reuters reported this week that Nvidia made a $20 billion move to hire most of the founders of chip startup Grok after OpenAI discussed chip supply with the startup.

“Growth appears to be concentrated in large deployments and specific regions, and shipments to China are significant enough to impact a quarter,” said eMarketer analyst Gadzo Sevilla.

AMD expected revenue of $9.8 billion, plus or minus $300 million, for the first quarter, compared with analysts’ average estimate of $9.39 billion, according to data compiled by LSEG. AMD said about $100 million of those first-quarter sales would come from its MI308 AI chips in China.

The midpoint of the sales forecast represents a year-over-year increase of about 32% and a sequential decline of about 5%, AMD said. And excluding China sales that Wall Street didn’t estimate, the low end of the forecast range was $9.4 billion, above analysts’ estimates.